Poll shadow looms over India-EU FTA

Feb 8, 2013, 04.44AM ISTTNN[ Indrani Bagchi ]

NEW DELHI: The window of opportunity for an India-European Union (EU) free-trade pact is closing rapidly. With "elections in India on the horizon", it would make it difficult for the political leadership to offer tradeoffs. And on the other side, the EU is negotiating free-trade agreements (FTAs) with its biggest partners—the US and Japan—and that could impact EU-India talks.

"Elections (in India) are on the horizon... So we have a closing window of opportunity," said EU ambassador to India Joao Cravinho. India and the EU are also still far from agreeing on key issues like autos, wines and most importantly, the services sector. The FTA is being negotiated for the past five years now and has missed several deadlines.

Cravinho said India was refusing to allow a zero tariff structure on auto exports from Europe. Indian cars are largely of Korean and Japanese make, but increasingly Indian-owned companies can go to Europe, while the same is not true for their cars, he said. He promised that prices for top-line European cars like Mercedes, BMW and Audi could be halved.

Of equal importance is the fact that the EU and the US and the EU and Japan are beginning negotiations on FTA. While there are many hurdles, especially on divergent regulatory structures between the EU and the US, the imperative to get it done is greater than ever before as both continue to limp economically. The trouble would be that such an agreement could become the global standard and may put pressure on India, by raising the bar for tariff concessions. Besides Cravinho said, while India-EU trade showed a spurt in 2011, the EU's trade with other countries increased last year save for two nations — India and Russia. If this trend continues, the incentive for FTA might be an uphill battle.

On Gujarat CM Narendra Modi, Cravinho said that the EU had invited him for lunch to press for "accountability" for the 2002 riots. "Modi came to (have) lunch with us in January at our invitation to discuss what happened in 2002. To discuss issues that have risen in terms of judicial process, accountability for 2002, to also discuss the development in Gujarat and his recent electoral victory," said Cravinho. That, he said, was a matter of interest for Indians and for the rest of the world. But indicating that the EU was also looking for ways to engage Modi more officially, the EU envoy referred to the judgment against some of those involved in the riots. "Some months ago, there was end of one part of judicial process which shows that justice in India may be slow but it produces results. And that has helped to look towards closure of what everybody agrees is very terrible set of events," he added. Recently, the British opened their doors to Modi, a move that might show the way for others.

EU ambassador Joao Cravinho pointed out that Indian cars are largely of Korean and Japanese make, but increasingly Indian-owned companies can go to Europe, while the same is not true for their cars.